Khodorkovsky Found Guilty By Moscow Court

by Tatiana Smolenskaya, Tax-News.com, Moscow

18 May 2005

In a verdict that is a suprise to none, the Meshchansky Court of Moscow has found the former head of Yukos oil company, Mikhail Khodorkovsky, and the head of Menatep Group, Platon Lebedev, guilty of seven charges ranging from tax evasion to fraud and embezzlement.

As the judges began reading a several hundred page verdict on Monday, the opening statement - "the court has established the guilt" of the defendants - has left nobody in doubt as to the outcome of the trial. The only question that remains is the severity of the sentence to be handed down to Khodorkovsky and his co-defendant Lebedev. Prosecutors are demanding that both men receive the maximum ten years prison term.

With the hearing adjourned on Tuesday afternoon, the reading of the lengthy verdict by the judges will commence this morning, and is likely to last into Thursday before sentencing can begin, bringing to an end a saga which began almost 18 months ago when the former Yukos boss was arrested at gunpoint from his private jet and taken to Moscow's Matrosskaya Tishchyna prison.

Khodorkovsky has strenuously denied the charges laid against him throughout the whole affair, and maintained that there was, and remains, a highly political motive for his arrest and subsequent show trial as the Kremlin sought to nullify any other oligarch who may have political ambitions.

However, while the Putin government may have succeeded in demonstrating its power, the proceedings have only served to damage confidence in the Russian system as far as foreign investors are concerned. In the first half of 2003, Russia reported a net inflow of capital for the first time since the collapse of the Soviet Union, but the trend was reversed in the third quarter after the government began to target Yukos, and more than $7 billion left the country.

According to comments made by one financial industry leader at the time, the vilification of Khodorkovsky was the "single worst thing the Russian government could have done for the economy." Capital flight from Russia increased to $7.9 billion last year, and President Putin is considering a tax amnesty in order to tempt some of the money back.

Summarising foreign concerns, US State Department spokesman Richard Boucher observed that: “The conduct of the Khodorkovsky-Yukos affair has eroded Russia’s reputation and sapped confidence in Russian legal and judicial institutions."

He added: “We think it is in the government’s, Russia’s, interest to act to assure the world that the institutional weaknesses highlighted by this case are going to be addressed in a timely and direct manner.”

Recommended